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Street SmartsSM:
What's in a Name?

By Ed Freedman

Before you make one more deal under your current business moniker, read this article. Both Visa and MasterCard have initiated an aggressive strategy to deal with the problem of merchant level salespeople (MLSs) doing business under names that they have not properly registered with their sponsor bank.

In the past, the card Associations first sent out warnings to violators; they only levied a $10,000 fine against confirmed repeated offenses or when they saw that the businesses did not take corrective action.

This has all changed. Now the Associations simply assess a $50,000 fine, no questions asked and no second chances. (There is an appeals process, but it's not something that you'd want to go through, and it's expensive.)

If you sell merchant services or credit card processing services, you need to do business under the registered name of your acquirer. If you don't, the Associations consider this improper business name registration and a violation of their rules.

The rules apply to how you answer the phone, how you greet people in voice mail and what you print on your fax coversheets, letterhead, business cards, Web sites, marketing materials, merchant agreements and any advertisements.

It's a simple concept. However, some sales reps have dodged or fought the issue for years. In the past, these reps have willingly taken these risks, even against specific written and verbal advice. At this point, I emphatically say: Stop doing this!

A $50,000 fine is a major expense that can destroy your residual income and personal credit history. Is there even one hardworking MLS who would take that risk? Probably not, but an alarming level of confusion does exist among MLSs when it comes to this particular issue of compliance.

I visited GS Online's MLS Forum where "business names" has been a hot conversation topic. Here's what was heating up on the Forum:

"I just got a notice from an ISO about [how] the Association is gonna fine MLSs $50K for doing business under their own name that is not registered with the sponsor bank. Ouch. I guess most of us will need to carry several sets of business cards with the ISO's name! The notice also stated that all MLS marketing materials, phone and answering greetings must say the ISO name. I wonder how this would work if I rep for several ISOs?" - JoeT

"According to the Association rules posted on GS Online, you're not even supposed to rep several ISOs, so I'm pretty sure they'll tell you to just choose one and rep that one in all materials, phone, etc." - jtmerch

"I'm pretty sure you can answer in the generic 'merchant services' and you would be OK." - tazman

"I received the same notice. So my question is how can some ISO, and there is more than one, still offer a private-label package? We all know there are several of these out there. I have been told by a couple of these ISOs that as long as the application says 'processing by' on the front in small print, you are OK. I have also been told they just have to know who you represent." - Coach Bob "So then, if an MLS would register with HSBC (for $1,000 as mentioned in another thread), would that MLS be 'in compliance' to rep for any HSBC ISO?" - renrod

"I noticed that these compliance rules urgent notices that I received came over the last few weeks from mid-size to larger ISOs who are Global Payment Systems ISOs and HSBC Bank. None of the other ISOs I write for sent any such messages. Possibly some of you got them from other sources.

"I also wondered what would be wrong with having a phone answer: 'For ABC Merchant services, press 1; for DEF, press 2; for XYZ, press 3, etc.' You could also have a different greeting in each mailbox: 'For technical support, call 1-800 ...; for chargeback and statement issues call 1-800 ..;' or, 'if you have been referred to your agent, please leave a message after the tone.'

"I think it would be a good idea anyway to have those numbers and possibly Web sites as a greeting on your answering machine and you are probably within the compliance rules." - maketelinc

"I think there are several 'interpretations' of the rules, and that's what makes it so difficult to comply. I know that the ISO I work for has designated a compliance officer that works directly with Global and HSBC, with the guidelines that Global provided us with, to make sure all of our offices are in compliance.

"The gray areas of these rules are not worth the $50K fine, and/or causing bad blood with Global. We want to make sure they are protected as well as we are from any fines or violations. Therefore we offer many solutions to help the agents get in compliance." - JamieG

"It is going to be very interesting to see how this plays out. Assuming every registered ISO in the industry has violators in their ranks and then understanding that the card Associations are run by the large issuing banks, like let's say Chase or Bank of America, are the Associations really going to fine one of its controlling members? I seriously doubt that a Chase will be fined or BofA.

"So will that mean that there may be a shift towards these larger issuing banks to avoid the scrutiny? Then one could argue that the fines have a monopoly effect of eventually pushing the bulk of the acquiring business to the large issuing banks, i.e., the card Associations. It could also have the effect of putting all the small players out of the ISO/MSP business.

"Maybe Visa/MasterCard only want the largest of players to participate in this end of the industry. Maybe it's too hard to police the 450 or so registered ISOs. Perhaps if there were just 40 or 50 registered ISOs, then they could implement their rules more effectively. Perhaps we may see a rapid shift in who is allowed to represent who in this business. The days of representing five different providers may be coming to a screeching halt. Or just maybe I'm thinking too much about all this ... " - alphapro

"This industry is so screwed up, it's not even funny. Thousands of people work in it and nobody knows the rules. If all it takes is $1,000 to become a registered MLS, then let's do it. I'd have no problem writing a check as long as I get something official in writing from the Associations. Why is something that seems so simple, so complicated? I know that I would sleep better at night if I paid $1,000 and were registered. I think most would agree.

"Do the Associations read this forum? If so, please ... instruct us how to comply ... Most of us are just hardworking citizens just trying to earn an honest living. Here's an idea: Let's donate the $1,000 fee to the tsunami relief effort. Charge us another $50 and send each of us the rules and regulations book with a certificate allowing us to sell Visa/MasterCard. Include a document that says, 'I will abide by the rules of this book,' which is to be signed and returned.

"Life is too short. Let's work together. We are partners. We want to help eliminate credit card fraud and criminal activity. I want to comply. There's enough money for all of us. Help me help you." - terpgash

As you can see, MLSs have many opinions, and some misunderstandings, when it comes to business name compliance. Since I don't have the space in this column to explain the card Associations' rules and regulations on this topic, I'll highlight the key points and hopefully answer your primary questions.

First, the $1,000 registration idea does not work. While MasterCard has a program to register MLSs (not organizations or companies with many sales representatives), Visa does not.

If you decide to register with MasterCard, you would not be covered with Visa, which is the Association that charges the $50,000 fine. So MLSs are still looking at the same deal: full ISO/MSP registration with both Visa and MasterCard that requires $10,000 upfront, a $4,000 annual renewal fee and a fairly extensive application to complete. Currently, no other options exist.

For many of you, this is not practicable. Therefore, you need to learn the actual Association rules with regard to "doing business as" (D/B/A) name compliance. There is no room for "interpreting" the rules when Visa assesses a $50,000 fine, and the only other avenue is an appeals process that costs a non-refundable $5,000.

My advice to you is to strictly adhere to doing business as the registered name of the company whom you represent. This means using the registered ISO name in all instances, from answering phones to fax coversheets, letterhead, marketing materials, Web sites, business cards and everything in between.

Please understand that the Associations have "spider" software to search out certain words on business-related Web sites. Putting a Web site online but not advertising it will not put you in the clear; the Associations could still fine you. In fact, this is how they will most likely do it.

Another scenario I've seen is through disgruntled merchants. You know the types. They're angry over a lease that they didn't understand or the fact that their account was just put on 100% reserve.

They can complain to Visa or MasterCard, and if they complain about your unregistered D/B/A name, there's your $50,000 fine. Why put yourself at risk only to do business as any old name?

I also strongly recommend showing caution when working with marketing referral partners. Specifically, be careful about your marketing materials and Web pages. A Web page that touts merchant services and that is facilitated through a Web-hosting provider should not reference Visa or MasterCard nor should it reference credit card processing rates and fees.

You really need to wait until you transfer these over to your site where only the registered ISO/MSP name appears before the Association names and credit card processing rates.

Finally, do not listen to anyone who tells you that it's okay if you do business as "Ray's Original Merchant Services, a registered agent of XYZ Merchant Services, Member Service Provider for XYZ Bank, USA."

While this might be creative, it's not in compliance with the card Association rules. In fact, I'm sure you could find dozens of other ways to work around the rules. The problem is that the Associations do not like it when you do this, and they will express their displeasure with a $50,000 fine.

Have I referenced the $50,000 fine enough in this article? Good, because I'm doing it with the hope of waking up any of you non-compliant MLSs out there who think you will continue to get away with it.

Instead, let's all get it together, respect the Association rules and continue to prosper in this phenomenal business.

On a lighter note, if I haven't already confused you enough, here is what Visa had to say when asked about D/B/A compliance for MLSs:

"As an Association, Visa maintains rules that are designed to guide Visa members in ensuring the integrity of Visa payments and protecting all stakeholders in our system. For information about Visa's rules, independent sales organizations and other third parties need to work with their sponsoring Visa member financial institution to understand any rules that might apply and their impact to their specific operations."

To translate for Visa: If you have any questions, you need to speak with your sponsor bank for edification. The problem is that sponsor banks have not always done a great job at disseminating information down to the MLS.

In any event, Visa and MasterCard have made it very clear. Do business under a non-compliant name and you'll pay a price. So talk to your registered ISO. Take the necessary steps to become compliant, and remember that in this instance, Shakespeare might not be right. A rose by any other name might not smell as sweet.

I'd like to take this opportunity to announce that I have two more columns left to write, and then I will turn "Street Smarts" over to a new host selected by The Green Sheet. Sadly for me, it's the end of an extraordinary, two-year run.

I've never enjoyed a project more. Can you believe that throughout this two-year commitment, I have never missed a deadline or an issue? Stay tuned. I promise not to disappoint you in my last two columns.

"Life moves pretty fast. If you don't stop and look around once in a while, you could miss it."
- Matthew Broderick as Ferris Bueller in the movie "Ferris Bueller's Day Off"

See you next time where the rubber meets the road.

Ed Freedman is founder and President/Chief Executive Officer of Total Merchant Services, one of the fastest growing credit card merchant account acquirers in the nation. Freedman is the driving force behind all business development activity as well as the execution of Total Merchant Services' marketing plan, including recruiting and training independent sales offices and establishing strategic alliance partnerships with leading vendors, so that Total Merchant Services can provide its customers with the highest quality and most reliable services available.

To learn more about Total Merchant Services, visit the Web site at www.totalmerchantservices.com. To learn more about partnering with Total Merchant Services, visit www.upfrontandresiduals.com or e-mail Freedman at ed@totalmerchantservices.com.

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